Metal fabrication capex set to rise in 2022

According to The Fabricator:

Capital spending in metal fabrication is back—big time. After undergoing a brief decline, capex spending is on the rise in 2022, nearly matching the industry’s pre-pandemic highs. That’s according to the recently released “2022 Capital Spending Forecast,” published by the Fabricators & Manufacturers Association Intl. (FMA).

Every year FMA surveys the industry and, from a statistical sample, projects how much U.S. metal fabricators will be spending on equipment and software over the next year. Because these surveys ask about expected (not past) spending, unexpected economic changes usually take a year to register. So, the big drop in projected spending during the Great Recession registered in the FMA survey in 2010, not in 2009 or 2008, and something similar occurred over the pandemic. Fabricators asked in late 2019 said they expected 2020 spending to jump to new highs—but, of course, the pandemic changed those plans.

What’s significant, though, is just how minor the industry’s drop in spending was over the past few tumultuous years. During the Great Recession, expected spending plummeted from more than $2 billion in 2009 to just $1.3 billion in 2010. Expected spending in 2020 was $2.7 billion; in 2021 that dropped to $2.4 billion, and in 2022 expected spending jumped back to $2.6 billion. The Great Recession broke the credit markets, which pulled back investment across the board. The pandemic recession affected companies in different ways; some suffered significantly, while others (especially those lucky enough to serve the right end markets) thrived.

The concentration of capital spending also has shifted, especially when it comes to plant size. Historically, very small businesses—shops with fewer than 20 employees—have on a collective basis dominated capital spending. Yes, each small shop spent a miniscule amount compared to larger employers, but because there were so many of them, they collectively spent more.

That’s changing. The industry has about the same number of small shops it had in 2010, but their collective buying power isn’t what it was, at least relative to what larger organizations are spending. In 2022, predicted collective spending of plants with between 50 and 250 employees reached $1.1 billion, more than triple the amount the same group reported in 2010. For plants with fewer than 20 employees, that amount was $261 million, down from the $308 million reported in 2010.

As always, large organizations (more than 1,000 employees) have per-plant spending that still soars above their smaller cousins, but because the sector has few “whales,” their total spending, while significant, doesn’t dominate the entire industry. In 2010, plants with more than 1,000 employees expected to spend collectively more than $311 million. In 2022 that number dropped to $262 million.

All this likely has to do with trends in metal fabrication equipment. A small shop might not have to spend much to get a small, used press brake or even a small plasma table. But to invest in what has become truly game-changing equipment—fiber lasers, automated-tool-change press brakes, and all the robotics and material handling automation that can go with them—takes a much higher financial commitment.

The shift in spending by plant size also can be seen in the kinds of equipment fabricators are buying. At $288 million, expected welding power source spending for 2022 has more than doubled since 2010, when it was the largest equipment category behind consumables. This makes sense, considering just how pervasive welding is in metal fabrication. The largest OEMs and the smallest fab shops don’t have much in common, but they both probably employ welders.

In 2022 welding power sources no longer represent the largest spending category. Fiber lasers now sit on top of the list, with more than $318 million in expected spending. Moreover, fabricators plan to spend more than $207 million on hydraulic press brakes alone. And this doesn’t even include the nearly $70 million being spent on electric press brakes and another $90 million expected to be spent on panel benders and folders. These big-ticket items require fabricators to have financial resources that might be tough for the smallest shops to pull together.

Perhaps one of the survey’s most telling points was how fabricators said the pandemic affected their investment in automation. Nearly 80% of respondents at companies with between 500 and 999 employees said the pandemic accelerated or broadened their automation investment. Only 28% of the smallest companies (with fewer than 20 people) said the same.

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